In a Bind: Peak Sealing Technologies’ Product Line Extension Dilemma

Case Summary:
Emma Taylor, product manager of K2-Tape - a premium pressure carton sealing tape line- at
Peak Sealing Technologies is worried about the entry of small regional tape producers who
were successful in cheap & economy graded versions. K2-Tape offered patented adhesive
technology & high-quality material that showed exceptional adhesion properties, holding force,
tear resistance & tensile strength and was popular for reliable seals in high-stress shipping
situations and superior performance for challenging sealing applications in manufacturing,
packaging and retail business. Tensile, the competitor of PST, has launched the BOPP
economy product line and it got popular in the Boston metropolitan market which lacked brand
loyalty and was extremely price sensitive. On preliminary research by Taylor, Tensile’s Ecolism
& Ecoplus Wide were way better than other competitors and were potential competitors for K2’s
RD-48 & RDS-72 respectively. The suggested resale price to distributors for these competitors'
products was around 20% & 30% cheaper respectively than PST’s products. Taylor has to
recommend Ethane Sloane, President & CEO of PST whether to continue with advanced
patented technology and high-end products or enter the economy grade segment to sustain in
the price-sensitive market.

Scenario 1: Continue with advanced patented technology and high-end products

Pros Cons

● Retained brand equity among premium and
superior performance segments.
● PST’s ability to hold Market power as it is
able to charge higher prices due to superior
performance of K2-Tape
● The premium pricing strategy which rewards
distributors with larger profits sustains the
distributor loyalty and steers the customers
against competitors' products
● Price sensitive customers may look for viable
alternatives
● There may be pressure on the sales
representatives to keep up the sales
● Point-of-difference may soon diminish to point-
of-parity

Scenario 2: Enter the economy grade segment

Pros Cons

● A new product will add to new revenue
stream
● The company can leverage Economies of
scale both in manufacturing and distribution
networks.
● Will help to create value for customers in the
economy product category
● Chances of losing existing loyal customers
● Loss of brand reputation due to compromised
quality and deviation from its core competence
i.e. high quality product and innovative
technology
● Need for more sales representatives
● If not positioned carefully, might lead to

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 cannibalization of the existing products

Final Recommendation

PST should continue with its advanced patented technology and high-end products due to
following reasons:

1. The company is recognised as a leader in quality, performance and technological

innovation and because of this customers are ready to pay higher for its products.
2. The sales of K2-Tape can be increased by increasing the time that sales people
currently devote to the product category (the time has reduced considerably). According
to distributors, the PST sales team was too busy with other products and did not spend
enough time servicing existing K2-Tape customers and developing new business.
3. In order to induce buying among price sensitive customers, PST can launch its GP-48
category with less length or reduced number of rolls. If this happens, then the price can
be reduced and price sensitive customers will be able to buy it. SInce the quality of this
tape is superior to other options in the market, there are chances of repeat purchase.
4. Proper management of salesforce is required. A dedicated sales team can be allocated
to cater to K2-Tape since distributors were getting demand for new businesses but the
sales team did not devote enough time.
5. Training of distributors can also be considered as an option so that they can give basic
information to new businesses instead of waiting for the sales team for the joint call and
completely losing out the potential customers.
6. Analytical sales approach has worked well for K2-Tape in the past so the company
should keep its focus on the value proposition i.e.the lowest overall cost due to superior
performance.

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